Weekly Feed5 Mins Read
Kristal Weekly Feed | 08 June 2020
These are tough times and it can get difficult to understand and analyze major events around the globe and how they affect your investments. In our weekly market update, we help you slice and dice the latest news updates to make informed investment decisions.
Headlines this week:
- Stocks and bonds saw a rally last week. Markets expected to open flat on Monday.
- U.S.-China tensions thaw a bit, U.S. unemployment show unexpected rise causing Asia markets to have a good run.
- European markets received a huge boost as the EU announced a 750 billion euro recovery fund to battle the worst economic crisis since the Great Depression in the 1930s.
- Overall, most major indices across the globe posted gains for the week.
1. United States
The US markets continued their positive run with most indices tallying higher. The S&P 500 was up by 1.69% and the 10-year treasury yield rose to 0.67%. Though the treasury department is still issuing new bonds to finance the fiscal spending plan in the country, thus putting price pressure on the 10-year bond, the yield for the bond did track up for almost every hour that stocks ticked high, indicating true risk-on sentiment in the market.
The U.S. and China spoke directly about honoring the terms of the phase one of the trade deal they had signed last year; after may days of volleying accusations and sanction threats at each other. Many states in the U.S. also reopened their economies this week. With fiscal stimulus aiding consumer spending, the general consensus is that the economy might recover quickly rather than slowly.
While the market looked right through the unemployment data published on Friday, it still remains to note that about 14 million Americns have lost their jobs so far in this year. While there is a huge number of workforce waiting to re-enter offices, we also have to remember that not all businesses will be in the place to hire at the same capacity as before.
Shares in Europe surged last week as countries eased lockdown restrictions. The European Central Bank (ECB) has decided to inject fresh stimulus into the eurozone economy, causing the pan-European STOXX Europe 600 Index to end the week 6.91% higher. Germany’s Xetra DAX Index climbed 10.60%, the CAC 40 in France rose 10.47%, and Italy’s FTSE MIB Index tracked 10.71% higher. In the UK, the FTSE 100 Index added another 6.45%.
Core eurozone bond yields climbed on the week as the ECB increased its support for Eurozone economies. In Germany, the 10-year bund yield traded at around -0.3% on Friday, up some 11 basis points (0.11%) from the start of the week. Peripheral eurozone bond yields fell markedly on the news, with the Italian 10-year yield slipping to its lowest level since March.
Stocks in Asia have been trading higher Monday morning after U.S. jobs data released Friday had an unexpected jump, spurring hopes of a speedy economic recovery from the coronavirus pandemic.
Japanese stocks continued their upward trend from the first week of June, with the Nikkei 225 Stock Average advancing 986 points (4.5%). In China, the Shanghai composite was up around 0.6% while the Shenzhen component jumped 1.214%. Hong Kong’s Hang Seng index also gained 0.48%. Only the Kospi fell into negative territory as it traded fractionally lower.
Most of the APAC region’s reaction was based on news of about 2.5 million jobs being added in the U.S. in the month of May. Dow Jones had forecast a drop of more than 8 million.
Meanwhile, data from China showed exports contracting in May as demand continued to drop due to the lockdown. However, the country managed to post a record trade surplus last month even as imports dropped.
Heading into next week…
This week primarily hinges on the developments related to the spread of Covid-19 infections as global economies open up gradually. The US Federal Reserve is also set to meet next week to review policy rates. All eyes will be on Chief Jerome Powell for his upcoming address on Wednesday afternoon.
The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.
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